Your employer provided disability insurance is an important employee benefit, but it may not be providing you with the amount of physician disability income insurance protection you may need. Most employer sponsored insurance doesn’t offer the high benefit limits and specialized coverage necessary to fully meet your income protection goals. Recognizing where those limits are in your employer provided coverage can help you secure the right level of supplemental physician disability income insurance to help fill those gaps in coverage.
Most employer provided disability insurance offers a definition of disability that’s generic to occupation. This may result in you being denied disability benefits if you were unable to perform your current duties, but able to work in another area of medicine. As a physician, you may want to consider having specialty-specific disability protection with an ‘own-occupation’ or “own-specialty” definition of disability. Securing own-occupation disability protection means benefits can be payable if you’re unable to perform the duties of your own medical specialty, even if you could work in another job inside or outside of the medical profession.
Most employer-provided disability insurance only provides coverage up to 60% of your base income and up to a specified limit. Because employer policies usually do not consider any bonuses or extra pay which you may typically receive as income, you may be underinsured if your base salary does not reflect your total income.
It’s important for you to understand that benefits you receive through disability insurance provided and paid for by your employer, with before-tax dollars, would be subject to both federal and state income tax. This means that what you thought was a $10,000 a month benefit could turn out to be more like $6,000 a month (assumes a 40% tax rate), depending on your federal and state tax brackets.
The benefits of coverage you buy and pay for with your own after-tax dollars are generally not going to be taxed. Supplementing employer coverage can help fill in the gap in disability benefits left by taxation. Consult your tax advisor.
Your employer-provided group disability insurance is not yours to take with you if you leave your job. Disability insurance you buy and pay for yourself is yours and will remain with you as you move through your career as long as premiums are being paid. Maintaining your own disability income insurance as a supplement to your employer provided disability coverage allows you to help protect your income in the future if you change jobs or if your health changes and you can no longer secure coverage on your own.
Disability insurance is designed to provide you an income if you’re unable to work due to a covered disabling illness or injury. And while you may have coverage through your employer, that coverage on its own may not provide the benefits you may need to meet your financial obligations. Is that a risk you’re willing to take? A trusted insurance specialist with physician focused insurance expertise can help you explore your options to secure the right amount of physician disability income insurance to help protect yourself and your financial future.
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